America’s Cup budget shrinks – so do expectations

It may be the Mount Everest of sailing, but expectations are shrinking for the America’s Cup’s transformative impact on San Francisco.

Sailing’s premier race, coming to the city in 2013, is now scheduled to have fewer competitors, fewer event facilities and no direct investment from race organizers into long-term infrastructure on the waterfront, according to officials and a new city report.

The latest cut came Friday when the Event Authority, the regatta’s business arm, laid off 28 workers – about a quarter of the staff – from information technology, marketing and communications. Fourteen positions were in San Francisco, and the others in offices around the world, race officials said.

“We’re having expenses match the revenues as much as we can, and a number of people will be leaving as a result,” said Stephen Barclay, who took over the Event Authority as interim CEO this week in an organizational shakeup.

The America’s Cup, led by billionaire Oracle co-founder Larry Ellison, initially planned to spend $111 million on repairing deteriorating piers the city has not been able to afford to fix for decades. But race officials backed away from that cornerstone agreement last month.

Now the revised deal, which the Board of Supervisors will consider Tuesday, calls for the port to invest nearly $22 million in pier and related repairs, as outlined in an audit report released Friday by Harvey Rose, the city’s budget and legislative analyst.

“Those dollars were not available until the first deal didn’t happen,” said Michael Martin, the city’s project manager for the event. Since the piers would no longer be set for long-term development by the Event Authority, they would generate more rent than anticipated for the port because the authority will not retain rent-free control of the piers after the races, he said.

The port will need to spend an estimated $21.9 million, including nearly $8 million for five team bases at Piers 30-32 and $7 million for a cruise terminal at Pier 27, the report says.

Yet the port’s spending plan currently falls about $1 million short of that goal. In the report, port officials say they will likely cut back on dredging and related costs to make up the difference.

The port proposes to pay for those projects with a combination of lease financing agreements, bond proceeds and port operating funds. It is also banking on $1.6 million from the race’s Organizing Committee, which is trying to raise $32 million over three years to cover the city’s costs for law enforcement, cleanup, transportation and other event services.

So far, the committee has raised $12.5 million, all but $827,000 of which is pledged.

Fundraiser confident

Mark Buell, a philanthropist and Democratic Party fundraiser who is leading fundraising efforts for the Cup, said he remains confident donors will step forward despite the reductions. But, he acknowledged, “It takes a little longer to explain because there are more details about it being published and discussed publicly.”

Rose also notes the Organizing Committee has not yet secured a bond that ensures it and the city stick to their commitments to host the event. The big changes to the city’s obligations have complicated efforts to take out that bond, Martin said.

“The latest deal terms are in decent shape,” said Supervisor David Chiu, who has criticized aspects of the project and called for Rose’s report. “Assuming we resolve details on how we cover the city’s costs for the event, I’m hopeful we’ll be able to move the approvals forward shortly.”

Aside from scaling back the development deal, the Event Authority has shaken up its top staff.

Barclay’s predecessor, Richard Worth, is now focused on securing international television deals for the event. Last month, Worth told the San Francisco Business Times it has been “bloody tough” lining up international sponsorships, but Barclay said British network Sky TV has already committed to broadcast 12 hours of live exhibition racing from Naples, Italy, next month.

“We would rather have Richard focus his attention on bringing in revenue,” Barclay said. “We want to get some of the broadcasters around the world to start paying good money for the pictures they all want.”

Race organizers are paying NBC to broadcast portions of exhibition matches domestically, rather than getting paid for it, in an effort to boost interest. Barclay declined to disclose the amount paid in that deal, but said, “In the scheme of things, it’s small numbers.”

Organizers had also tried to transfer one of two planned exhibition races in San Francisco this summer and fall to New York to generate media attention and sponsorships, but Barclay said that plan was cut short.

Protecting Crissy Field

So has the number of event facilities. Crissy Field, which is part of the Golden Gate National Recreation Area, will no longer be an official viewing area. However, the city has budgeted up to $3 million that could go to the National Park Service to clean up after visitors who drift there.

“Certainly people can look at different pieces and say that wasn’t the original version” of the deal, Martin said. “But I don’t think it was scaled back. I think it’s evolving like any sort of innovative, challenging effort would.”